Dualism in Economics Dualism: Concepts and Definition the Concept of Economic Dualism Was First Introduced by J
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Dualism in Economics Dualism: concepts and definition The concept of economic dualism was first introduced by J. H. Boeke in 1953 in the context of the dual economy and dual society of Indonesia. Dualism states the co-existence of two separate worlds. There is a chronic difference between the two worlds which tends to increase over time if developed nations do not help the developing counterparts. It is also major characteristics of developing countries. Hence, the term was used to refer to various asymmetries of production and organisation that exist in developing countries. Boeke first used the term to represent an economy and a society divided between the traditional sectors and the modern, capitalist sectors in which the Dutch colonialists operated. According to I. Little, “an economy is dualistic when a significant part of it operates under a paternalist or quasi-feudalist regime, while another significant part operates under a system of wage employment—which may be capitalist or socialist.” There is both production asymmetry and organisational asymmetry in dual economies. The former implies that capital is not used at all in agriculture and land is not used at all in industry. The latter implies that even when returns to labour are equalised across the sectors by labour mobility, it is not the marginal products of labour in the two sectors which are so equalised. Most LDCs have a colonial heritage. For example, India was under, the British rule for more than two centuries and it inherited a colonial structure at the time of Independence. It is often felt that the heritage of colonialism is partly responsible for the present-day backwardness and underdevelopment in LDCs like India. The colonial era before World War II created the problem of economic dualism which implies the coexistence of traditional and modern sectors with the same economy or region. Colonialism brought in its wake enclaves of modernised sector the population was literate, worked for wages or engaged in commerce and have learned how to use modern technology such as railroads, motor cars, electric power and simple machines. By contrast, in the traditional sector, the population was largely illiterate and engaged in subsistence agriculture. These were not used to wage labour (as in share-cropping) and accustomed to traditional methods of production and pre-industrial technology. Theories of dualism There are different theories which are of the view that the poverty and underdevelopment of poor countries is attributed to their dualistic character. 1) Social Dualism, (2) Technological Dualism and (3) Financial Dualism. Social Dualism or Sociological Dualism J.H. Boeke is a Dutch Economist who studied Indonesian Economy and presented his theory of social dualism. He maintains that there are three characteristics of a society in the economic sense. They are as: (i) Social Spirit (ii) Organizational Form (iii) Techniques Dominating Them. Their inter-relationship and interdependence is called the social system or social style. A society is homogeneous if there is only one social system in the society. But the society which has two or more social systems is known as dual or plural society. Dr. Boeke says that the dual society is a society which has two full grown social styles which represent pre-capitalism and post-capitalism. Such a dual society is furnished with the existence of an advanced imported western system on the one side and endogenous pre capitalistic agricultural system on the other side. The former is under the western influence which uses the advance techniques and where standard of living is high. The later is native and it is furnished with the outdated techniques and low social and economic life. This is called social or sociological dualism and these two systems are clashing. The imported social system is highly capitalistic and it may be socialistic as well as communistic system. Characteristics of Dualistic Society: On economic basis the dualistic society is classified as by giving the names: (i) Eastern Sector and (ii) Western Sector. There are certain characteristics of eastern sector of a dualistic economy which distinguishes it from western sector. They are as: (i) The needs of eastern sector are limited. People pass a contented life. (ii) People work for social needs rather for economic needs. For example, if a three acres are enough to supply the needs of a household he will not cultivate six acres. (iii) Goods are cultivated according to their prestige value rather on their use value. (iv) As a result of all above, the eastern economies are characterized with backward bending supply curves of effort and the risk taking. (v) The native industries have neither organization nor capital and they are ignorant of modern technology and market conditions. (vi) People are indulged in speculative activities rather in business enterprises. (vii) They do not take risk by making productive investment. (viii) They lack the initiative and organizational skill which is a feature of western sector of dual economy. (ix) Labor is unorganized, passive and unskilled. They are reluctant to leave their village and community. They are fatalist. (x) The urban development takes place at the cost of rural life. (xi) Exportation is the main objective of foreign trade in the eastern sector while the western sector believes in imports. Due to these features of eastern society the western economic theory is not applicable as far as UDCs arc concerned. The western economic theory is meant to explain capitalistic society whereas eastern sector is pre capitalistic. The western sector or society is based upon unlimited wants and money economy etc. Moreover. The MP theory cannot be applied in UDCs for resource allocation and distribution of income because of immobility of resources. Thus Boeke says: We should not try to transplant the delicate houseplant of western theory to tropical soils where an early death awaits for it. If the pre-capitalistic agricultural sector of eastern sector is attempted to develop along western lines it will create retrogression. The modern agricultural techniques cannot be applied how-long the mental attitudes of the farmers are not changed, otherwise the increase in wealth following modern technology will result in further growth of population. Moreover, in case of failure of modern technology, the indebtedness of the country will increase. Therefore it is better that these existing agricultural systems should not be disturbed. As far as industrial field is concerned the eastern producers cannot follow the western technology on the basis of economic and social reasons. He says that the adoption of western technology to industrialize Indonesian economy has moved the goal of self sufficiency farther and ruined its small industry. Boeke refers to five kinds of unemployment in UDCs: (i) Seasonal, (ii) Casual, (iii) Unemployment of regular workers, (iv) Unemployment of white collard class, (v) Unemployment of Eurasians. According to Boeke the govt., is unable to remove such unemployment because of the reason that it will require the funds which the govt. cannot avail. Booke says that limited wants and limited purchasing power in eastern sector hamper economic development. If the food supply is increased or industrial goods are increased, it will bring a glut of commodities in the market. The prices will fall and economy will face depression. But this does not mean that Boeke is against industrialization, and agricultural improvement. Rather he is in favor of slow process of industrialization and agricultural development on small scale which could have an adaptability with the dualistic structure of eastern society. The urge for development should come from the people themselves. New leaders must emerge who should work for the goal of development with faith, charity and patience. Criticism: Professor Bengmin Higgins has criticized the social dualistic theory on the following grounds: (i) Wants are not Limited: If we analyze "Indonesia's life" we do not find that the desires of the people are limited because here the values of MFC and MPM are higher. This is the reason that the govt. has to impose import restrictions. Moreover, whenever the harvest is good the farmers become prosperous and the demand for luxurious goods rises. (ii) Casual Labor are not Unorganized: Boeke presented the version that casual workers are unorganized and passive. But this may be true as far as agricultural sector is concerned but they are not unorganized in coffee, tea, rubber and plantation etc. (iii) Eastern Labor is not Immobile: Boeke thought that eastern labor is immobile. It is not so because of attraction of modern facilities of life in the urban areas. Moreover the high income incentives force the labor to move from rural areas to urban areas. (iv) Dualistic Theory is not particular to UDCs Only: The eastern society, according to Boeke, only exists in UDCs. It is not true. It does exist in Canada, Italy and even in the United States. (v) Applicability to Western Society: According to Professor Higgins most of the characteristics of eastern society given by Boeke are present even in the western societies. For example, during hyperinflation, speculation is preferred to investment. This means, the people in the western countries also have a strong desire to keep their capital safe and in liquid form, The western society also believes in conspicuous consumption as discussed by Veblin and Snob effects. The backward bending supply curve of efforts has been experienced by Australia during post war period and by US in the fifties. (vi) Not a Theory but a Description: It is objected that the Boeke's dualistic theory is merely a description rather than a theory. His findings are based upon neo-classical theory which has the limited applicability in the western world. (vii) Does not Provide Solution to the Problem of Unemployment: Boeke's dualism centers more on socio-cultural aspects rather on economic.